The other side of China’s generosity

Good tidings in Kenya often mean that Rwanda and the region get to more than bask in the glow: they join in the party. Such it is with Kenya having just signed deals with China worth $5 billion.
Gitura Mwaura
Gitura Mwaura

Good tidings in Kenya often mean that Rwanda and the region get to more than bask in the glow: they join in the party. Such it is with Kenya having just signed deals with China worth $5 billion.

The China package includes an energy project and wildlife protection and, more significantly for the region, support to build the much talked about railway.

The re-built standard gauge railway will link the Kenyan border town of Malaba with the port of Mombasa, facilitating more efficient and faster movement of peoples, goods and services within the EAC.

China’s generosity, if one can call it that, to the region and the continent seems somewhat clear-cut and deceivingly unencumbered. 

While Western powers have tended to offer their support to social services such as health and education, tying their aid or grants to such indicators as human rights records, reforms and transparency, China’s aid has tended to centre around infrastructure development with loose strings attached.

It has one apparent condition: That Chinese multinational firms to a large extent undertake the job.

This has seemed a small price to pay, and so China has continued to be welcomed with open arms in the region and the continent at large.

According to global research firm Open Data for International Development (AidData), EAC countries received about $11 billion in investment and development aid from China between 2001 and 2011.

Tanzania and Uganda received $4.6 billion and $4.5 billion, respectively, amounting to 80 per cent of the funds. Kenya got $1.6 billion, while Rwanda and Burundi received $469 million and $165 million, respectively.

A Chinese firm is expected to construct Rwanda’s $650 million Bugesera International Airport.

However, Kanya’s newly signed deal makes it the top receiver. But, as the Persian proverb goes, he who wants the rose must be aware of the thorn.

The coming of China to Africa has meant the bringing along its people and their baggage.  It will be recalled the decry in Kenya sometime in August last year, as reported in the papers, of seeming invasion of Chinese hawkers selling anything from roast maize and cheap Nokia phones in Nairobi to cultivating small-scale farms and engaging in fishing in Nyanza.

Add to these fears of setting up shop in Nairobi of the notorious Chinese or Yellow mafia, also known as the Chinese Triads.

According to a recent newspaper report, the dreaded global criminal syndicate – known the world over to be involved in human trafficking, prostitution, loan-sharking, gambling, murder and gun smuggling – might be setting base in Kenya’s capital, targeting the growing Chinese population and businesses in the country.

Good press of Chinese industry, it appears, must also attract bad press. Thus, there have been allegations of China’s currency manipulation by undervaluing  the Yuan, with the net effect being cheaper Chinese imports and unbalanced trade at the expense of market regulated currencies.

A recent paper by the US Congressional Research Committee claims that this has been the reason of continued rise in China’s trade surplus with the world.

Take this particularly interesting example. The theory purporting Chinese currency manipulation has been tested using the Big Mac Index by International Monetary Fund (IMF). The index measures the prices of a MacDonald’s burger around the world adjusted for exchange rates.

In July 2012, according to one illustration, a Big Mac burger in China cost Sh208 ($2.45), while it was retailing for Sh368 ($4.33) in the US at the same time, in the same retail outlet.

According to this measurement, the Chinese currency was undervalued by over 50 per cent based on purchasing power parity. The IMF, and some academic studies, also supported the index, with the analysis saying that the Yuan is undervalued by between 30 per cent and 50 per cent.

China has strongly disputed the claims of currency manipulation, saying it manages its currency to ensure domestic stability.

It matters little what the US and the West thinks, but China seems to be doing good by Africa, though we must always remember that even roses have thorns.

Twitter: @gituram 

 

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